The Dubai Port Deal

On SquawkBox this morning, we discussed the political noise that’s erupted over the potential purchase by a Dubai company of the operation of cargo terminals and ports in the U.S. Dubai Ports World is buying the British firm Peninsular and Oriental Steam Navigation Company that currently operates terminals in New York Harbor, Philadelphia, Baltimore, and other big ports.

This is not just one episode. As wealth increases around the world, this type of thing will happen again and on a bigger scale. But this reaction is really an example of paranoid anti-Semitic racism. If Israel or Germany were buying this company, would there be this reaction? I don’t think so.

But the real story is that Dubai and Singapore, heavily influenced by China, were the only bidders for this company. Congress should be asking why there aren’t any American firms bidding for this company. I don’t have a problem with calling for more information. Transparency is a good idea. But that’s not what the critics are calling for; they’re saying we don’t want to sell this to Arabs.

We ought to be focusing on the capital. Five years ago, 46% of the world market cap was in America. Today it’s 38%. Why are there no U.S. bidders? It’s because we have policies that drive capital offshore. Other countries have policies that attract capital. If we don’t change our policies, we’d better get used to foreign investors owning our ports and other things. We need to drive policy, not second guess deals. The results will have terrible consequences for U.S.-Arab relations, obviously. But it’s important to note that since Iraq, stock and land prices in the Persian Gulf have tripled. The increased stability due to the U.S. military presence has effectively increased the duration of land by increasing the length of time investors are going to own it. That money has got to go somewhere and it’s getting allocated into the Helmsley building in New York, ports, and other projects. These are big investors now. If you drive them away, you’re going to drive the dollar down and the stock market down with it. We live by the golden rule – whoever has the gold gets to rule. We need to focus on keeping and attracting capital into the U.S.